For many years, Medicare has had a dual reimbursement system for hospitals, paying both a professional fee and a “facility fee” designed to reimburse the hospital for its unique infrastructure and overhead costs. While this made sense when hospitals were isolated, stand-alone facilities providing emergency, acute and surgical care, it makes less sense in the outpatient community care setting.

Facility fees are one of the negative consequences of the rapid acquisition of previously independent physician practices by hospitals. Once a practice becomes hospital-owned, the hospital may charge a facility fee on top of the traditional professional fee. Such fees often come as a surprise to unsuspecting patients who, despite getting the same care from the same community-based doctor, are suddenly subject to a new “facility fee.” Such fees pose a significant financial burden on many consumers.

We established a bipartisan roundtable on hospitals and health care in 2014, which held a series of hearings. Based on those hearings, we introduced a number of bills that were then combined into SB 811 (now PA 15-146) to create comprehensive health care reform. With this legislation, Connecticut became the first state in the nation to ban certain facility fees. As of January 2017, hospital-owned practices will not be allowed to charge facility fees for evaluation and management services. We chose these types of services as a starting point because those services include the most common office visits that historically have been performed in a physician’s office, and require no hospital support. The legislation also contains some of the most aggressive facility fee notice and reporting requirements in the nation. This will provide information that will assist us in crafting appropriate policy going forward.

The act also requires a comprehensive cost containment study, for which the vendor was recently chosen. This study is funded in part by the state and in part by private foundations. The vendor will deliver a report with recommendations prior to the 2017 session. We believe that this study will provide the Connecticut General Assembly with appropriate evidence to continue the reform that was started in SB 811 and to make educated policy decisions regarding issues on cost and quality, including facility fees and site-neutral pricing.

It is important to realize that while facility fees get the most attention in terms of increasing health care pricing, they are not the only way that powerful consolidated health systems increase health care costs. In fact, facility fees are responsible for only about a quarter of the increase in prices caused by these consolidations. The consolidated entities are also able to use their position to negotiate substantially higher reimbursement rates from payers. The payers then reimburse the hospitals at a much higher price than the lower-cost community providers who have little negotiating power. These higher negotiated rates drive up health care costs for employers, taxpayer-funded government programs and individual consumers who are increasingly responsible for a greater share of such costs through higher deductible and coinsurance requirements.

PA 15-146 is a beginning and not an end of legislative oversight of our rapidly changing health care system. We are committed to protecting both patients and community providers but we have to be armed with appropriate information and evidence in order to craft the best policies.